Three municipalities in Georgia are suing
Netflix and other streaming giants, joining a series of lawsuits hoping to revive the bane of everyone’s existence: cable fees.
The backstory. Utilities like water, electricity and cable TV usually pay 5 percent of their local revenue to cities for the ‘right of way’ to reach consumers e.g. through public cables and pipes. This franchise fee is almost always passed onto the consumer.
amidst the modern-day glut of streaming services, cable TV is dying a quiet death. Over the next five years, 25 million U.S. households are expected
to bid adieu to cable forever, cratering the franchise fees cities rake in.
To counteract this, cash-strapped cities are claiming streaming giants should cough up franchise fees. All the lawsuits follow a similar argument: companies like Netflix should pay a “right of way” tax because they use municipal infrastructure simply by offering video streaming services over the internet.
The cases – filed in Georgia, Texas, Indiana, Ohio and Nevada - are a little far-fetched
, but the repercussions are huge:
- Netflix made $103mn from Gwinnett County in Georgia over the last 5 years – which translates to $5.15mn in retroactive fees for that area alone.
Yikes. With the pandemic hacking municipal budgets, slapping a franchise fee on cash-heavy streaming companies is attractive.
- Shoehorning the eyeball economy into regulations that were created for an entirely different industry, though, isn’t ideal - especially for consumers, who’ll probably shoulder franchise fees through increased subscription prices.
Bottom line: with no precedent to fall back on, it’ll take years for courts to decide whether streaming is cable’s sleeker, but equally taxable, cousin.
Media guru Doug Shapiro says
the streaming biz will be way less profitable than what it’s replacing: traditional TV. Meanwhile, Netflix’s stock surged 17%